Is SaaS Taxable in New Mexico in 2026?
Yes. software-as-a-service (SaaS) is taxable in New Mexico. If your company has nexus and offers SaaS to consumers or businesses, you must collect taxes and remit them to the state.
| SaaS | |
|---|---|
| Digital Goods | |
| Confused? | Talk to us -> |
| Sales | $100,000 |
|---|---|
| Transactions | N/A |
| Physical? |
| New Mexico | 4.88% |
|---|---|
| Average Total Rate | 7.62% |
| Local Rates Apply |
New Mexico also taxes most digital services and products. The statewide sales tax rate in New Mexico is 4.88%. Some municipalities in the state apply their own additional sales tax. The average combined rate is 7.62%.
Businesses are required to collect sales tax on New Mexico transactions only if they have nexus in the state or a connection to it (more on nexus later in this article).
What does taxability mean for SaaS?
SaaS is not typically downloaded onto a user’s device. It stays on the provider’s servers or in the cloud, where users access it on a subscription basis (for instance, monthly or yearly). When the subscription ends, users lose access.
Since SaaS is relatively new and isn’t a tangible product, states vary in how they classify it. This can make understanding and staying on top of sales tax difficult for SaaS providers. In addition, states frequently change or update their tax laws — adding another layer of complexity.
Taxation rules in New Mexico
In New Mexico, all SaaS sales are taxable.
As mentioned previously, your company is required to collect sales tax from New Mexico–based customers only if it has nexus in the state. There are two types of nexus: physical and economic.
Your company has physical nexus if it has a physical presence in the state, such as an office, inventory, or employees.
Economic nexus is established if your company earns at least $100,000 in annual revenue from sales to New Mexico–based customers in the previous calendar year. While some states, such as Rhode Island and Hawaii, impose transaction count thresholds alongside revenue thresholds, New Mexico solely uses a revenue threshold, simplifying compliance for smaller software companies.
If you meet any of these criteria, you must collect taxes on sales in the state and remit the funds to the appropriate tax authorities.
There are several types of companies and entities that are exempt from paying the gross receipts tax and sales tax in New Mexico. For example, all departments that are part of New Mexico city or county governments are exempt from sales tax. Public schools are also exempt from these taxes. If you sell your services to Indian Nations or Tribes, those sales are exempt if they occur in the Tribe's territory.
Digital goods
Most digital goods are also subject to tax. This includes streaming video, e-books, and music. If a digital product is transferred through a tangible medium or electronically, you'll need to collect taxes.
Example: How local tax rates may apply
To gain a better understanding of how local tax rates can apply to SaaS transactions, let's say that you own a company that provides businesses with customer relationship management (CRM) software.
If a customer in New Mexico purchases a monthly subscription to your CRM software (and if you have nexus in the state), you'll need to collect sales tax from them when the purchase is made. When an exempted entity purchases your software, you must verify that it is exempt before the sale goes through.
As mentioned before, the base tax rate in New Mexico is 4.88%. However, local districts can also levy a sales tax, which means that the average combined rate is 7.62%. The service's point of use determines whether local taxes will be applied to the transaction.
In Santa Fe, for example, the local rate is 3.31%. In total, $81.90 in sales tax would be charged on a $1,000 SaaS subscription sold to a customer in Santa Fe.
It's highly recommended that you review New Mexico's rules regarding the gross receipts tax to ensure you comply with all existing guidelines.
Additional resources for staying compliant
New Mexico's Taxation and Revenue Department provides businesses and residents alike with ample resources related to the state's tax laws. For example, it's a good idea to use the department website's "News & Alerts" section.
When you navigate to this page, you'll be able to view all recent press releases, which should include any changes to the existing tax laws. The department also maintains a YouTube channel that you can visit to find tutorials and information about business taxes.
You should also visit the "Businesses" section of the website if you need additional help and resources that can assist with compliance. Keep in mind that the department hosts some tax-related workshops throughout the year for businesses.
The bottom line
If you sell SaaS products and digital goods in New Mexico (and have established nexus in the state), you must start collecting and remitting sales tax. The initial rate is 4.88%. However, you'll need to monitor local tax rates as well. By remaining compliant with the latest tax regulations and laws, you can stay compliant and avoid fines. Use the resources the state provides to minimize your mistakes and ensure you remit enough taxes. If you'd like to manage your company's tax situation more efficiently, consider Accounly.
